[Federal Register Volume 63, Number 161 (Thursday, August 20, 1998)]
[Notices]
[Pages 44621-44623]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22355]


=======================================================================
-----------------------------------------------------------------------

FEDERAL MARITIME COMMISSION

[Docket No. 98-15]


Hual As--Service Contracts And Time-Volume Rate Arrangements With 
Ocean Freight Forwarders; Order Of Investigation and Hearing

    HUAL AS (``HUAL''), formerly known as Hoegh-Ugland Auto Liners A/S, 
is an ocean common carrier which operates vessels in the trade between 
the United States and Europe and is engaged in the ocean transportation 
of automobiles and boats from the United States. HUAL is a Norwegian 
company located at Dronningensgt. 40, Oslo 1, Norway. It currently 
maintains several tariffs at the Commission, and its Automated Tariff 
Filing and Information System (``ATFI'') organization number is 
015120.1 According to HUAL's Internet site, HUAL's main 
branch office in the United States is HUAL North America Inc., The 
Jericho Atrium, 500 North Broadway, Suite 259, Jericho, NY 
11753.2
---------------------------------------------------------------------------

    \1\ This organization record was filed in ATFI on October 22, 
1997. HUAL's predecessor, Hoegh-Ugland Auto Liners A/S, had ATFI 
organization number 001444, and it maintained tariffs between June 
1994 and October 1997.
    \2\ HUAL has additional branch offices in Baltimore, MD; 
Chicago, IL; and Jacksonville, FL. In addition to its branch 
offices, HUAL has a booking agent in the United States: Palmetto 
Ship Agencies, Inc. in Charleston, SC. See HUAL's Internet site--
http:/www.hual.no/hual.
---------------------------------------------------------------------------

    In 1997 HUAL entered into at least four service contracts with 
ocean freight forwarders where none of the actual shippers were 
identified. These service contracts provided for shipments of vehicles 
and boats from United States ports to European ports. It appears that 
there are common elements of these four service contracts and of the 
shipments made thereunder, including:
    1. The service contract identified the freight forwarder as 
``shipper/freight forwarder'' or ``shipper.''
    2. There was no shipper certification in the service contract.
    3. The service contract contained a provision which stated, 
``Carrier will pay freight forwarders commission of 5% on base ocean 
freight only to licensed freight forwarder if services, as stipulated 
by F.M.C. regulations, are provided whether or not freight forwarder is 
contract signatory.''
    4. The service contract was filed at the Commission.
    5. The essential terms for the service contract did not contain the 
service contract's provision about freight forwarder commission.
    6. For the shipments that moved under the contract, the freight 
forwarder identified itself for the ocean common carrier's bills of 
lading as the freight forwarder.
    7. For the shipments that moved under the contract, the freight 
forwarder did not identify itself for the ocean common carrier's bills 
of lading as the shipper.
    8. The freight forwarder collected freight forwarder compensation 
on the shipments that moved under the service contract.
    9. There is no evidence that the freight forwarder certified to 
HUAL that it performed the freight forwarding services.

A review of service contracts indicates that HUAL may have been signing 
service contracts with freight forwarders since May 1993.3
---------------------------------------------------------------------------

    \3\ For service contracts signed before October 1997, HUAL was 
known as Hoegh-Ugland Auto Liners A/S.
---------------------------------------------------------------------------

    The 1984 Act defines a shipper as the ``owner or person for whose 
account the ocean transportation of cargo is provided or the person to 
whom delivery is to be made.'' Only shippers or shippers' associations 
may enter into a service contract in accordance with section 8(c) of 
the 1984 Act. Therefore, unless a company can be defined as a shipper, 
it cannot enter into a service contract.
    As defined by the 1984 Act, a freight forwarder dispatches cargo 
from the United States on behalf of the owner or person for whose 
account the ocean transportation of cargo is provided or the person to 
whom delivery is to be made. Because a freight forwarder is an agent of 
the shipper and not the shipper, the statute would not appear to permit

[[Page 44622]]

a freight forwarder to enter into service contracts on its 
own.4 Rather, it appears that a forwarder can only sign 
service contracts on behalf of a disclosed shipper where the shipper is 
the principal entering into the contract.
---------------------------------------------------------------------------

    \4\ The Commission is aware of the contrary views on this matter 
of some in the industry. This proceeding should provide an 
appropriate forum for the adjudication of this issue.
---------------------------------------------------------------------------

    None of the shippers who were listed in the shipper identification 
box on HUAL's bills of lading, were signatories to the HUAL service 
contracts nor were they affiliates of the service contract signatories. 
However, HUAL seems to have allowed these shippers to obtain the 
service contract rates for their shipments.
    By entering into service contracts with freight forwarders, HUAL 
apparently allowed freight forwarders and shippers to obtain 
transportation for property at less than the rates or charges 
established in HUAL's tariff or service contracts by an unlawful means 
in violation of section 10(b)(4) of the 1984 Act. Furthermore, HUAL 
seems to have charged, demanded, collected or received less 
compensation than the rates or charges that would otherwise be 
applicable for the service contract shipments in violation of section 
10(b)(1) of the 1984 Act.
    In addition to entering into service contracts with freight 
forwarders, HUAL also appears to have allowed freight forwarders to 
enroll in HUAL's time-volume rates (``TVR'').5 Currently, 
HUAL maintains in its tariff a TVR (ATFI Tariff No. 015120-004, Tariff 
Rule 26, Sub-rule 09, TVR No. 3698) which states:

    \5\ A freight forwarder can give notice to a common carrier of a 
disclosed shipper's decision to enroll in a TVR.
---------------------------------------------------------------------------

    The name of the enrollee shall appear on the Bill of Lading as 
the Shipper, Consignee, or Forwarder in order that cargo represented 
by the Bill of Lading be credited under this offering. There shall 
be only one shipper, one consignee, one port of loading and one port 
of discharge per Bill of Lading. * * * Enrollees desiring to ship 
cargo under this offering should notify the Carrier in writing using 
the form specified at the end of this offer. No cargo shipped by 
enrollee will qualify for this offer until the Carrier has received 
enrolee's [sic] enrollment form The [sic] The enrollment must be in 
the name of the Shipper or Consignee making the application.

    The 1984 Act defines a TVR as a tariff rate which will ``vary with 
the volume of cargo offered over a specified period of time.'' 46 USC 
app. 1707(b). A freight forwarder does not have cargo of its own which 
it can commit to a common carrier, and for the reasons discussed above, 
the statute would not appear to permit a freight forwarder to enroll in 
TVRs on its own account. Furthermore, it appears that some shippers who 
received HUAL's TVRs were not enrolled or gave no notice to HUAL of 
their intention to enroll in the TVRs, as required by the Commission's 
regulations at 46 CFR 514.13(b)(19)(I)(D). Thus, by permitting freight 
forwarders to enroll in TVRs, HUAL may have allowed freight forwarders 
and shippers to obtain transportation for property at less than the 
rates or charges established in HUAL's tariff or service contracts by 
an unlawful means in violation of section 10(b)(4) of the 1984 Act. In 
addition, HUAL also seems to have charged, demanded, collected or 
received less compensation than the rates or charges that would 
otherwise be applicable for the TVR shipments in violation of section 
10(b)(1) of the 1984 Act.
    It appears that HUAL has paid freight forwarder compensation to 
forwarders for service contract shipments since at least March 1995. 
HUAL also may have paid freight forwarder compensation to the freight 
forwarders for the shipments that moved under its TVRs. Section 
19(d)(1) of the 1984 Act sets forth certain conditions under which a 
common carrier can pay freight forwarder compensation on a shipment. 
One condition is that the shipment must be dispatched by the freight 
forwarder ``on behalf of others.'' Another condition is that the 
freight forwarder must certify to the carrier as to the forwarding 
services that it performed. While it appears that the freight 
forwarders dispatched the HUAL service contract and TVR shipments on 
behalf of others, there is no evidence that certifications of freight 
forwarding services were provided to HUAL regarding the shipments. 
Therefore, HUAL may have violated section 19(d)(1) in paying 
compensation to these forwarders without obtaining any freight 
forwarder certifications.
    Section 19(d)(4) prohibits a common carrier from knowingly paying 
forwarder compensation to a freight forwarder which has a beneficial 
interest in a shipment. Beneficial interest is defined in the 
Commission's regulations at 46 CFR 510.2(b) as:

a lien or interest in or right to use, enjoy, profit, benefit, or 
receive any advantage, either proprietary or financial, from the 
whole or any part of a shipment of cargo where such interest arises 
from the financing of the shipment or by operation of law, or by 
agreement, express or implied.

HUAL's service contracts and TVRs gave the signatory freight forwarders 
various benefits and advantages with respect to the shipments that took 
place under these agreements. Since the freight forwarders obtained the 
benefits and advantages by means of the HUAL agreements, they may have 
had beneficial interests in the shipments.6 Furthermore, 
HUAL appears to have facilitated the beneficial interests of the 
freight forwarders through the provision of service contracts and TVRs 
to the freight forwarders. Therefore, HUAL should have known whether 
the freight forwarders had beneficial interests in the shipments. Thus, 
HUAL may have knowingly paid freight forwarder compensation on TVR and 
service contract shipments to freight forwarders which had beneficial 
interests in the shipments in apparent violation of section 19(d)(4) of 
the 1984 Act.
---------------------------------------------------------------------------

    \6\ The beneficial interest appears to be the benefits resulting 
to the forwarders from HUAL providing the forwarders discounted 
service contract and TVR rates which only are available to shippers 
if they use those forwarders for their cargo. The beneficial 
interest does not arise out of any arrangements between the 
forwarders and shippers.
---------------------------------------------------------------------------

    The Commission's regulations at 46 CFR 514.4(d)(5)(i)(A) and 46 CFR 
514.17(a)(1), require a common carrier to file at the Commission the 
essential terms of service contracts so that the terms of the service 
contracts are available to the general public, which includes shippers 
who may want ``me-too'' service contracts. The Commission's regulation 
at 46 CFR 514.17(d)(7)(vi), imposes a mandatory obligation to file in 
Essential Term No. 6 ``any and all conditions and terms of service or 
operation or concessions which in any way affect such rates or 
charges.'' In its essential terms, HUAL did not file the service 
contract provision that the ``Carrier will pay freight forwarders 
commission of 5% on base ocean freight only to licensed freight 
forwarder if services, as stipulated by F.M.C. regulations, are 
provided whether or not freight forwarder is contract signatory.'' A 5% 
commission paid to a service contract signatory is a concession which 
affects the rates or charges in the service contracts. Therefore, by 
failing to file the complete essential terms as mandated by the 
Commission's regulations, HUAL may have violated the Commission's 
regulations at 46 CFR 514.4(d)(5)(i)(A), 46 CFR 514.17(a)(1), and 46 
CFR 514.17(d)(7)(vi).
    The Commission's regulation at 46 CFR 514.7(e)(1), requires the 
shipper signatory to a service contract to certify its shipper status 
on the signature page of the contract. The Commission's regulation at 
46 CFR 514.4(d)(5)(i)(A), requires the carrier signatory to file the 
service contract with the Commission. HUAL apparently did not include 
the

[[Page 44623]]

information for shipper certification on the signature pages of its 
service contracts; as a result, none of the freight forwarders who 
entered into service contracts with HUAL certified their shipper status 
in the contracts. Thereafter, HUAL filed these service contracts at the 
Commission. Thus, HUAL appears to have failed to file complete service 
contracts at the Commission in violation of the Commission's 
regulations at 46 CFR 514.4(d)(5)(i)(A).
    Now therefore it is ordered, That pursuant to sections 3, 8, 10, 
11, 13 and 19 of the 1984 Act, 46 U.S.C. app. 1702, 1707, 1709, 1710, 
1712 and 1718, and 46 CFR Part 514, an investigation is hereby 
instituted to determine:
    (1) Whether HUAL violated section 10(b)(1) of the 1984 Act by 
charging, demanding, collecting or receiving less compensation for the 
transportation of property than the rates or charges that are set forth 
in its tariffs;
    (2) Whether HUAL violated section 10(b)(4) of the 1984 Act by 
allowing freight forwarders and shippers to obtain transportation for 
property at less than the rates or charges established in HUAL's 
tariffs by an unjust or unfair device or means;
    (3) Whether HUAL violated section 19(d)(1) of the 1984 Act by 
paying freight forwarder compensation on shipments without obtaining 
certifications from the freight forwarders;
    (4) Whether HUAL violated section 19(d)(4) of the 1984 Act by 
paying freight forwarder compensation on shipments to freight 
forwarders who had beneficial interests in the shipments;
    (5) Whether HUAL violated 46 CFR 514.17(d)(7)(vi), 46 CFR 
514.4(d)(5)(i)(A) and 46 CFR 514.17(a)(1), by failing to file complete 
essential terms for its service contracts;
    (6) Whether HUAL violated 46 CFR 514.4(d)(5)(i)(A) by failing to 
file complete service contracts at the Commission;
    (7) Whether, in the event HUAL violated sections 10(b)(1), 
10(b)(4), 19(d)(1) or 19(d)(4) of the 1984 Act or the Commission's 
regulations at 46 CFR 514.4(d)(5)(i)(A), 46 CFR 514.17(a)(1), or 46 CFR 
514.17(d)(7)(vi), civil penalties should be assessed and, if so, the 
amount of such penalties;
    (8) Whether, in the event HUAL violated sections 10(b)(1) or 
10(b)(4) of the 1984 Act, the tariff of HUAL should be suspended for a 
period not to exceed 12 months; and
    (9) Whether, in the event HUAL violated sections 10(b)(1), 
10(b)(4), 19(d)(1) or 19(d)(4) of the 1984 Act or the Commission's 
regulations at 46 CFR 514.4(d)(5)(i)(A), 46 CFR 514.17(a)(1), or 46 CFR 
514.17(d)(7)(vi), an appropriate cease and desist order should be 
issued against HUAL.
    It is further ordered, That a public hearing be held in this 
proceeding and that this matter be assigned for hearing before an 
Administrative Law Judge of the Commission's Office of Administrative 
Law Judges in compliance with Rule 61 of the Commission's Rules of 
Practice and Procedure, 46 CFR 502.61. The hearing shall include oral 
testimony and cross-examination in the discretion of the Presiding 
Administrative Law Judge only upon a proper showing that there are 
genuine issues of material fact that cannot be resolved on the basis of 
sworn statements, affidavits, depositions, or other documents or that 
the nature of the matters in issue is such that an oral hearing and 
cross-examination are necessary for the development of an adequate 
record;
    It is further ordered, That HUAL is designated Respondent in this 
proceeding;
    It is further ordered, That the Commission's Bureau of Enforcement 
is designated a party to this proceeding;
    It is further ordered, That notice of this Order be published in 
the Federal Register, and a copy be served on parties of record;
    It is further ordered, That other persons having an interest in 
participating in this proceeding may file petitions for leave to 
intervene in accordance with Rule 72 of the Commission's Rules of 
Practice and Procedure, 46 CFR 502.72;
    It is further ordered, That all further notices, orders, and/or 
decisions issued by or on behalf of the Commission in this proceeding, 
including notice of the time and place of hearing or prehearing 
conference, shall be served on parties of record;
    It is further ordered, That all documents submitted by any party of 
record in this proceeding shall be directed to the Secretary, Federal 
Maritime Commission, Washington, D.C. 20573, in accordance with Rule 
118 of the Commission's Rules of Practice and Procedure, 46 CFR 
502.118, and shall be served on parties of record; and
    It is further ordered, That in accordance with Rule 61 of the 
Commission's Rules of Practice and Procedure, the initial decision of 
the Administrative Law Judge shall be issued by August 13, 1999, and 
the final decision of the Commission shall be issued by December 13, 
1999.

    By the Commission.
Joseph C. Polking,
Secretary.
[FR Doc. 98-22355 Filed 8-19-98; 8:45 am]
BILLING CODE 6730-01-P